Question

The Maurer Company has a long-term debt ratio of 60 and a current ratio of 1.30. Current liabilities are $910, sales are $5,110, profit margin is 9.40 percent, and ROE is 17.00 percent. What is the amount of the firm's net fixed assets? Multiple Choice o $4,238.29 o $3,531.91 o $6,790.82 o $7,973.82 o $5,148.29

Answer 1

Answer:

Current Ratio = Current Assets / Current Liabilities
1.30 = Current Assets / $910
Current Assets = $1,183

Profit Margin = Net Income / Sales * 100
9.40 = Net Income / $5,110 * 100
Net Income = $480.34

Return on Equity (ROE) = Net Income / Total Equity * 100
17.00 = $480.34 / Total Equity * 100
Total Equity = $2,825.52

Long Term Debt Ratio = Long Term Debt / (Total Long Term Debt + Total Equity)
0.60 = Long Term Debt / (Long Term Debt + $2,825.53)
$1,695.32 + 0.60 * Long Term Debt = Long Term Debt
$1,695.32 = 0.40 * Long Term Debt
Long Term Debt = $4,238.30

Total Liabilities and Equity = $910 + $4,238.30 + $2,825.52
Total Liabilities and Equity = $7,973.82

Total Assets = Total Liabilities and Equity
or Current Assets + Net Fixed Assets = Total Liabilities and Equity
$1,183 + Net Fixed Assets = $7,973.82
Net Fixed Assets = $6,790.82